When you start working, your salary feels like your ticket to freedom. It’s the one thing that is yours and yours alone, and you can choose how to spend it as you please. This is probably one of the reasons why most youngsters live from paycheck to paycheck.
Since your financial journey begins with your first salary, it is wise to start thinking about where you can invest your money so as to stay on the path to financial fitness. Here’s how to go about it:
- Make a budget
A budget helps you understand how much you’re spending each month on essentials and luxuries. A budget can help you align your finances so that you make room for savings. To start, list all expenses you incur in a month; this will help you determine how much money you have to invest and save each month.
- Start saving money
Start a recurring deposit/term deposit for an emergency fund – this means your bank will make periodic deductions from your account and will return it to your account at the end of a stipulated period with interest. You should also set aside a small amount each month to create a rainy day fund for any emergencies that may arise in the future.
- Invest through Systematic Investment Plan (SIP)
You can build a diversified investment portfolio with investments in mutual funds, stocks, bonds and debentures. You have the advantage of age on your side and since you have fewer responsibilities and dependents, you have a higher tolerance for risk. If you’re new to investing, start your foray with Systematic Investment Plan (SIP) in mutual funds.
- Buy insurance*
Get health insurance, along with accident and disability insurance. If you do not have any liabilities or dependents, taking health insurance should be your first priority.
- Plan your taxes
A lot of youngsters end up buying inadequate insurance cover or lock in our money in an unnecessary product for a long term in a bid to save taxes. Instead, plan your taxes early by investing in a tax saving product. Why not invest in an Equity Linked Savings Scheme (ELSS) for long term goals – along with good returns, you will get the additional benefit of savings on your taxes.
*This is just for information purpose and should not in any way be construed as any kind of promotion or endorsement of any insurance products by the AMC.